- Ontario's Family Law Act generally excludes gifts and inheritances received from a third party during the marriage from equalization.
- If a spouse inherited a cottage from a parent or other family member during the marriage, its value generally falls into the excluded-property category under the Family Law Act — meaning…
- A cottage bought by the couple during the marriage — whether from savings, a mortgage, or a mix of both — doesn't get any special exclusion.
Two families, two cottages, two very different outcomes in a divorce. One cottage came down through a spouse's family as an inheritance. The other was bought together, out of joint savings, early in the marriage. On paper they might look similar — a modest lakeside property the family has enjoyed for years — but under Ontario's equalization rules, an inherited cottage and a purchased cottage can be treated in fundamentally different ways.
Knowing which category your cottage falls into, and where the line between the two can blur, matters a great deal if you're separating.
Two Cottages, Two Very Different Starting Points
Ontario's Family Law Act generally excludes gifts and inheritances received from a third party during the marriage from equalization. A cottage bought jointly by spouses during the marriage, by contrast, is simply property acquired during the marriage — squarely part of the equalization calculation, the same as a house, an investment account, or any other asset built up together.
The distinction sounds simple, but real families rarely keep things that tidy over the years — which is where the complications start.
Inherited Cottage: The Exclusion — and Its Limits
If a spouse inherited a cottage from a parent or other family member during the marriage, its value generally falls into the excluded-property category under the Family Law Act — meaning it's typically kept out of the equalization calculation rather than shared with the other spouse.
That exclusion, however, isn't unconditional. A few common situations can complicate it:
- The cottage becomes the family's matrimonial home. If a couple treats the inherited cottage as a matrimonial home (for example, living there for significant periods or using it as a family residence rather than a strictly separate getaway), the special protections and treatment given to the matrimonial home can affect whether the inheritance exclusion still applies. This is a nuanced, fact-specific area — don't assume either way without getting advice.
- The inheritance gets mixed with jointly earned money. If both spouses' income was used for major renovations, additions, or mortgage paydown on the inherited cottage, tracing exactly what portion remains "excluded" versus what's become shared property can get complicated.
- The cottage is put into both spouses' names. Retitling an inherited property into joint ownership doesn't automatically destroy the exclusion, but it's a factor that can complicate how cleanly the exclusion can be argued and proven later.
Purchased Cottage: Fully in the Equalization Pool
A cottage bought by the couple during the marriage — whether from savings, a mortgage, or a mix of both — doesn't get any special exclusion. It's treated like any other asset acquired during the marriage: its value at separation, less any debt against it, factors into whichever spouse's net worth column it sits in, and the growth in that value is generally shared as part of the overall equalization calculation.
It doesn't matter if one spouse found the listing, negotiated the purchase, or handles the seasonal maintenance — as with other jointly acquired property, equalization generally doesn't trace who did what to determine entitlement.
Side-by-Side Comparison
| Inherited cottage | Purchased cottage | |
|---|---|---|
| Received from a third party during the marriage | Yes — this is what triggers potential exclusion | No — acquired through the couple's own funds |
| Generally excluded from equalization | Often, yes — subject to the limits above | No — fully part of the calculation |
| Affected by becoming the matrimonial home | Yes — can complicate or limit the exclusion | Not applicable the same way — already fully included |
| Affected by joint renovations or mortgage paydown | Yes — can blur the line between excluded and shared | Already shared — this just adds to its value |
What to Do If You Own a Cottage
- Locate the paperwork showing how the cottage came into the family — a will, an estate document, or a purchase agreement — since this determines which category you're dealing with.
- Track any significant joint spending on the property (renovations, additions, mortgage payments) separately from personal spending by the inheriting spouse.
- If the cottage has become a de facto second home used regularly by the whole family, raise that directly with your lawyer — it's exactly the kind of fact pattern that can affect an inheritance exclusion.
- Consider a marriage or cohabitation agreement if you want to protect a family cottage's exclusion status clearly and in writing, rather than relying on how things play out after the fact.
Frequently asked questions
My spouse inherited the cottage but we've spent every summer there for 20 years — does that change anything?
It can. Long-term, regular family use is one of the factors that can raise the question of whether the cottage has effectively become a matrimonial home, which can complicate or limit the inheritance exclusion. This is worth discussing with a lawyer using your specific facts rather than assuming the exclusion automatically survives or automatically disappears.
If we bought the cottage together, is there any way to exclude it?
Not through the standard exclusion categories — those apply to gifts, inheritances, and certain other defined categories, not to property the couple purchased together. A marriage contract signed before or during the marriage is the main way to create a different arrangement for a jointly purchased cottage.
Does it matter whose name is on the cottage's title?
Whose name is on title isn't, by itself, the deciding factor for either exclusion or inclusion — what matters more is how the property was acquired (inherited versus purchased) and how it's been used and treated during the marriage.
What if the cottage was inherited before we got married?
Property owned before the marriage is generally credited back to the owning spouse at its date-of-marriage value, similar to other pre-marriage assets — again, subject to the matrimonial home rules if it becomes the family's home.
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